- Associated Press - Monday, November 19, 2012

RICHMOND — The always-tricky exercise of projecting how much money the state will have and determining how to spend it is even more problematic this year because of what’s going on in Washington, Gov. Bob McDonnell said Monday.

Mr. McDonnell is putting together his proposed amendments for the last year of the two-year state budget. He will present his recommendations to legislative money committees on Dec. 17.

Meanwhile, President Obama and congressional leaders are in talks to avoid the “fiscal cliff” on Jan. 1, when tax increases and mandatory spending cuts are set to take effect. Virginia would be one of the states most affected by the automatic spending cuts — 9.4 percent for defense programs and 8.2 percent in nondefense appropriations — because one-third of its gross state product comes from direct federal expenditures, the highest percentage in the nation.

Mr. McDonnell said he has told lawmakers that by the time they return for the legislative session in mid-January, “the situation may be changed and we may have to make more significant adjustments than we’ve made in the past simply because the federal landscape is changing so quickly.”

The governor made the remarks after meeting privately with this economic advisory panel. He pledged “a cautious and conservative approach to budgeting to account for these uncertainties in Washington” and said Virginia is starting from a strong position because it has compiled $1.4 billion in budget surpluses during the past three years.

Last week, the McDonnell administration announced a 15.7 percent increase in general state tax collections in October over the same month a year ago, and the House Appropriations Committee was told by staff analysts and economists that Virginia can expect continued modest revenue growth next year.

Mr. McDonnell said he, too, does not expect revenue to decline next year, although it could grow at a slower pace depending on what happens in Washington. The real impact of the congressional action likely would not be felt until 2014, when the state begins a new two-year budget cycle, Mr. McDonnell said.

The governor previously asked state agencies to submit contingency plans for cutting their 2013 budgets by 4 percent, but he said Monday that he has issued similar directives “every year, good times or bad.” He said if the cuts were necessary, he would sort through the agency proposals and determine which ones to implement.